Darren Sissons is managing director at Portfolio Management Corp. His focus is on global equities and technology stocks.
Top picks:
BankUnited
This stock offers a progressive dividend, currently yielding 2.8 per cent, a very strong balance sheet and a proven management team. It is leveraged to south-eastern U.S. business growth, employment improvements and better commercial and residential real estate markets. Like all banks, the company will benefit from higher interest rates, which we don't currently have but will eventually endure.
Fonterra
New Zealand-based Fonterra is the largest global dairy exporter, with a global cost advantage in milk production and market-leading shares in virtually every dairy category in Australia, Chile, Malaysia, New Zealand and Sri Lanka, and either substantial market share and or niche market dominance in 120 other countries. It offers a progressive 4.2-per-cent dividend and a strong balance sheet. Future growth will be driven by milk production increases in New Zealand and Australia, continued production and distribution investments in fastest growing emerging economies in Asia and Latin America along with strategic acquisitions and or joint ventures in developed economies.
HSBC Holdings Plc
This stock offers a sustainable 4.5-per-cent dividend and a good balance sheet with capital ratios likely the best in Europe. It is the largest U.K. bank with global scope of operations, and, like all banks, will benefit from higher interest rates.
Past Picks: July 13, 2012
BP Plc
Then: $40.95
Now: $43.69
Total return: +12.52 per cent
BB&T Corp.
Then: $31.50
Now: $35.63
Total return: +16.25 per cent
Covidien Public Limited Co.
Then: $52.85
Now: $61.02
Total return: +29.10 per cent
Total return average: +19.29 per cent
Market outlook:
The out-performance of most international markets relative to the TSX over the last three years demonstrates the benefits of an internationally-diversified portfolio. Canadians should use our strong currency (while we have it) to pick up high quality, best of breed companies across the planet. Assuming investors follow this advice they will: achieve higher average dividend yields, generally invest at lower valuations, and invest in markets growing faster than Canada.
The markets started well this year as they typically always do. The run won't last and it typically fades as we move deeper into summer. The U.S. economy continues to strengthen and many U.S.-listed companies are currently valued above their near term fundamentals. However, longer term the valuation gap will narrow. Additionally, over the near term news headlines, Federal Reserve policy statements, the gradual elimination of quantitative easing and a poor political environment will support continuing U.S. market volatility. Europe is now taking the medicine required to fix its ailing economy. Banks must be recapitalized, austerity programs have been introduced and taxes will rise so companies with large Eurozone exposure will see a decline in earnings over the near term. Growth will continue across Asia but at a more modest pace as the region's major trading partners are either recovering from or declining into recession. Canada is likely to see flat-to-lower commodity prices but this weakness will be somewhat offset by opportunities created by a continuing U.S. recovery. Latin America is growing but inflation and government interference are still major problems.